Portfolio Advice
Comments
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I would probably take it a bit further (probably at the expense of Europe and Pacific.
I put some more money into Europe recently, both due to inherent value, and also the discounts on some well run European Investment Trusts.
Pacific is difficult as Australia tends to dominate passives and diggers and financials dominate Australia. For anything other than a mild over-weight in Pacific, there are reasonable arguments for adding active "satellites".I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
gadgetmind wrote: »Some people will tell you to heavily over-weight EM and that the US is washed-up and lazy, whereas others will tell you that EM is over-bought and corrupt and the US is an international power house. You're going to have to make up your own mind on that one.
Yes, that's what I'm finding. Both US and Europe seem to be in a rather precarious position right now, I doubt it's possible for anyone to produce a reliable estimate as to where either of them will be in five years time.
I think you're right it's just too unpredictable right now, hence trying to weight things equally over the next few years and then possibly tweak the percentages when (if) the world starts to recover.I have stared long and hard at that chart, as have many bright people, all of us trying to see patterns and predict the future, yet to no avail.Looks good to me. I think you're right to favour the UK relative to the ACWI... personally, I would probably take it a bit further (probably at the expense of Europe and Pacific). I think you're right not to underweight the US significantly as the HSBC funds have done.
Yes, I am tempted to reduce Europe a bit more given the state of the Eurozone and up the home-bias instead.
I think I will rebalance every quarter, or possibly less frequently if the percentages haven't moved very much. I am undecided yet whether to rebalance based on a time period or a percentage movement away from the model.Given that you're pretty clear on how you're going to run your tracker portfolio, I think at this stage it's just tweaking according to personal preference. Just one thing to bear in mind, unless you rebalance very regularly, it's going to be difficult to keep percentage-perfect allocation. I would probably just round off to the nearest 5%.
I think I will prefer doing it this way with separate funds. The fees will be lower and it gives me a sense of being "active" without it really making much difference whether I tweak the percentages here and there ...Just one last thought, if you are now trying to match the ACWI index with an increased UK allocation, it might be worth doing a final check to see if there is a cost effective way of using just ACWI and UK index trackers. I realise upfront costs would probably be more (e.g. Vanguard funds), but may be worth a final check.sabretoothtigger wrote: »Make a personal choice on what will succeed and why or employ an IFA
Thanks for the advice.
Do remember I have not allotted "most money to the USA" as you have said. Just because the USA has a higher share than any other individual country, that is not the same thing. If I have allocated 40% to the USA then that means 60% is NOT in the USA. So hardly "most" by any stretch of the imagination.0 -
*sigh*.
Don't you think I have?
Fact is, a LOT of funds are simply closet trackers.
Yes there are some specialist funds that have bet on a particular sector and have done well as a result. That doesn't prove that those funds have any particular skill though, all it proves is that their bets went the right way in the last 5 years.
Out of 1024 funds, 512 should underperform for each of 1 year, 256 for each of 2 years, 128 for each of 3 years, 64 for each of 4 years, 32 for each of 5 years, 16 for each of 6 years, 8 for each of 7 years, 4 for each of 8 years, 2 for each of 9 years, and 1 each and every year for 10 years.
That's pure random luck.
Out of 1024 funds run by monkeys with typewriters, 1 will outperform every year for 10 years.
And of course after 10 years that fund would undoubtedly have attracted billions in assets, perhaps £10 billion or more, and would be siphoning off £100m+ in fees, just by use of a monkey.
A true believer, its like arguing evolution with a biblical fundamentalist.
Yes, if a fund is a closet tracker there is no point in investing in it as opposed to a real Tracker - on the other hand there is no point in investing in a Real tracker as opposed to the closet. Dont forget that published returns are AFTER charges - a fund that underperformed the index every year by say 2% would not be seen as a closet tracker.
If you were correct in your general point, ISTM that over 10 years the random variation you allege should have evened out and the trackers should have benefited from their 1%-2% annual advantage and so should have given about 10-20% better return than the average. Do you agree?
Lets have a look and see if they have, Trustnet is your friend:
Over 10 years the IMA index (ie average of all funds) shows a 59.5% increase, the best AllShare tracker is 61.1% the worst Allshare tracker is 54.6%. So over 10 years there is no evidence that trackers do any better compared with the average FTSE All Share sector managed fund. There is no underlying advantage, or if there is it is extremely small as it is undetectable over 10 years.
(PS some people at this point allege survivorship bias - it doesnt apply if you use the IMA average as the IMA index is taken over all funds active at the time).
Next point - lets assume that fund X shows a random under and over performance against the tracker although providing the same 10 year return. Does this mean that the X is a worse/riskier investment than the tracker?
At first sight yes but lets think about it. The FTSE index can fluctuate wildly, particularly over the past 10 years. If fund X was very safe and simply provided a constant return every year it would show random under and over performance against the index. But clearly fund X would be a far better investment. This isnt a silly example - there are many managed funds that do show a lower variability than the FTSE and just for that reason are a better choice for many investors.
Finally you assert that specialist funds have no advantage over general funds. Clearly false - compare a general Global Tracker with a fund that focuses on say the Far East (a subset of Global). If you were correct why advocate FTSE trackers, the only sensible investment would be in a global tracker.
My personal evidence: over the past 10 years my investments in focused managed funds have returned over 100%.0 -
If I have allocated 40% to the USA then that means 60% is NOT in the USA. So hardly "most" by any stretch of the imagination.
Might be good to look at the percentages further if that is your preference, run with it.
What percentage is USA out of the world population. What percentage production, of debt and current wealth.
The global tracker is extremely biased is my main point, towards USA. Its labelled global but it is something else, its a western debt finance tracker I think
If we took the FTSE tracker it also is biased towards commodities, we often get people on here say I own FTSE to track UK stocks. Most of the FTSE100 is not UK
I had a very specialised tech tracker, that was very biased to Apple so its a consumer trends tracker really.
Do whatever you like, doesnt have to be any more complex then a trip to the supermarket with a shopping list but I would read every ingredients label a bit closer.
If the fund is passive, the investor has to be especially active and determined ?
Practical advice here might be to enter all the funds into morningstar or similar and it will try & give you more detail more easily.
Its actually very hard now I think about it as almost every company has foreign exposure which might feed back to UK or USA in any case
This is from digital look, for HSBC which is the largest part of FTSE. Its historical of course where as investment is always the future so who knows
So £100 into ftse would be 5 into HSBC which then is apparently getting at least 1 from USA excluding all the others. Ditto BP, etc0 -
sabretoothtigger wrote: ».....
If we took the FTSE tracker it also is biased towards commodities, we often get people on here say I own FTSE to track UK stocks. Most of the FTSE100 is not UK
I had a very specialised tech tracker, that was very biased to Apple so its a consumer trends tracker really.
Do whatever you like, doesnt have to be any more complex then a trip to the supermarket with a shopping list but I would read every ingredients label a bit closer.
If the fund is passive, the investor has to be especially active and determined ?
Agree completely. Look at the ingredients and also try to get some idea of the fund's general approach, for example its behaviour in both good and bad times.
One of my funds has been in "Emerging Europe" which I bought a long time ago in the belief that the then future new members of the EC would expand rapidly once the Brussels subsidies poured in. Sure enough, the fund did really well. However some time later, when I looked at the funds investments it turned out that it was actually fairly highly invested in Russia, Russian oil and gas in particular. So the investment success was nothing to do with my economic insight, more the global rise in commodities.
This is a problem with much Emerging Markets investment - the biggest companies in a developing economy are often drillers and miners whose success or otherwise depends on global trends, not the progress of the individual countries.
Sabretooth's point on Apple was mentioned in the latest Investors Chronicle - a Tech Tracker by replicating its Index had Apple as 17% of its portfolio, and Apple is dependent on 2 products. A high risk by any measure.0 -
A true believer, its like arguing evolution with a biblical fundamentalist.
Wrong way around. Evolution and passive investing have strong evidence to back them up, whereas those who put their in either faith intelligent design or the second sight of investment managers need to rely on a little on "well, it stands to reason" rhetoric.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
a Tech Tracker by replicating its Index had Apple as 17% of its portfolio
My own tech investment portfolio is nothing like that diversified!
I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
Apple was mentioned in the latest Investors Chronicle - a Tech Tracker by replicating its Index had Apple as 17% of its portfolio, and Apple is dependent on 2 products. A high risk by any measure.
Incredibly profitable though. I heard Apple makes more profit just from iphone (exc rest of Apple) then Exxon makes from all of its sales worldwide and its the largest oil company in the world (petrol can be low margin I think, tech is like 50% profit margin )
Im not a fan of passive or herd investing. I have trackers but I try to trade them, just holding tech would have been better so I had timed this wrong. Rebalancing is a good idea, I support that one
I still rank tech as best of USA even at a high price its better to hold quality unique products?
Morningstar also gives out risk and quality ratings I think. The tech tracker is right at the top of the scale, HL also do this I think0 -
gadgetmind wrote: »Wrong way around. Evolution and passive investing have strong evidence to back them up, whereas those who put their in either faith intelligent design or the second sight of investment managers need to rely on a little on "well, it stands to reason" rhetoric.
The evidence from this forum has been that those who see trackers as the only sensible way to invest can provide no more justification than to refer to the Blessed Tim with the addition of "it must be so" arguments, provide strawman references to stockpicking with pins and rely on journalists reports of uncited, apparently largely US, "academic research".
I have justified my views with reference to the, admittedly limited, publicly available data. I look forward to those who disagree with me doing the same.0 -
If you were correct in your general point, ISTM that over 10 years the random variation you allege should have evened out and the trackers should have benefited from their 1%-2% annual advantage and so should have given about 10-20% better return than the average. Do you agree?
You have that the wrong way round. The point is NOT that the tracker must beat the active by the cost difference, but rather that an active fund charging ~1.5% more per year has to outperform by 1.5% just to match the passive fund.Lets have a look and see if they have, Trustnet is your friend:
It is?
Not so sure myself. A lot of the figures are horribly outdated and/or unreliable.Over 10 years the IMA index (ie average of all funds) shows a 59.5% increase, the best AllShare tracker is 61.1% the worst Allshare tracker is 54.6%. So over 10 years there is no evidence that trackers do any better compared with the average FTSE All Share sector managed fund. There is no underlying advantage, or if there is it is extremely small as it is undetectable over 10 years.
Er, I don't know where you've got those numbers from, but I'm afraid this is rather like the evolution and intelligent design stuff. There are NUMEROUS published studies that show passive performs better. That's where the evidence is.
Now you're saying that they perform the same, well maybe, but it doesn't really make a compelling case for chucking millions of quid a year at active managers does it? 'If you give us hundreds of millions of pounds, we'll give you the same performance you could get for free'.
What a great sales pitch.(PS some people at this point allege survivorship bias - it doesnt apply if you use the IMA average as the IMA index is taken over all funds active at the time).
I'm not sure what you mean, as you've provided no evidence, no links, just bald statements.Next point - lets assume that fund X shows a random under and over performance against the tracker although providing the same 10 year return. Does this mean that the X is a worse/riskier investment than the tracker?
At first sight yes but lets think about it. The FTSE index can fluctuate wildly, particularly over the past 10 years. If fund X was very safe and simply provided a constant return every year it would show random under and over performance against the index. But clearly fund X would be a far better investment. This isnt a silly example - there are many managed funds that do show a lower variability than the FTSE and just for that reason are a better choice for many investors.
That assumes that all your wealth is tied up a single tracker.
That would be utterly ludicrous.
If otoh, you've got a balanced portfolio, a sharp fall in a particular asset class will be balanced by rises elsewhere.Finally you assert that specialist funds have no advantage over general funds.
No I didn't. What I said was that a specialist fund can outperform simply because its chosen area is performing well at the moment. It doesn't imply skill on the part of the investment manager.Clearly false - compare a general Global Tracker with a fund that focuses on say the Far East (a subset of Global). If you were correct why advocate FTSE trackers, the only sensible investment would be in a global tracker.
Who is advocating FTSE trackers?
So many strawmen, so little evidence. D+, must try harder.My personal evidence: over the past 10 years my investments in focused managed funds have returned over 100%.
And my passive funds have gone up 200%.
So what's your point?0
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